Fiat Chrysler

Who saved who? The partnership with Fiat will create the world’s sixth largest carmaker.

Fiat 2 years ago recovered from near bankruptcy. Chrysler first $10Bn, then $500M and they are still running out of petrol.

Who will take the steering wheel?

Fiat small economy cars. Chrysler diesel guzzlers. Where is the synergy ? Is this an American sell out or an Italian bravado? OK the Fiat Alfa Romeo line may potentially reach the USA market, but can you see an american familysitting in the Fiat 500 ?

Fiat will take an initial 20% and will not pay anything for its stake in Chrysler, but will instead bring its small engines and small-car platforms to the table.

Chrysler can no longer rely on thirsty muscle-cars.

This will enable the American company to produce re-skinned, own-brand Fiat models in its US and Canadian factories, thus providing employment – an important consideration given that the union will own a major stake in Chrysler.

Fiat’s input should also help reduce the group’s average fleet emissions, but in spite of much reporting on how US drivers are switching to more efficient cars, there are few reasons to expect them to queue up to buy these home-built small Fiats.

“Entering the US market is not easy for anyone,” points out Deutsche Bank’ Eric Heymann, who analyses the automotive industry as a whole rather than individual companies.

“Just look at how long it took the German or Japanese carmakers to be successful in the US.” Besides, he adds, “Americans prefer big cars”.

The timing of Fiat’s market entry, during a deep recession, is clearly not ideal either – regardless of which badge is slapped onto its cars.

Making matters worse is the fact that Fiat has never – not even during years of economic boom – enjoyed much success in the US with its funky, European motoring solutions.

There may be some appetite for its sporty Alfa Romeo brand in the US, though this marque is very small even in Europe and as such is quite marginal.

“For a company that narrowly escaped insolvency of its own just a couple of years ago, I would say that the risk is very high, and I say that independent of the current [gloomy] economic situation,” observes one European automotive analyst who asked not to be named.